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CPA Outlook Index Survey 2Q 2016

CPA Outlook Index Survey 2Q 2016
The CPA Outlook Index—a comprehensive gauge of executive sentiment within the AICPA survey— rose five points in the second quarter to 68, but still remains well below a post-recession high of 78 set in the fourth quarter of 2014. The index is a composite of nine, equally weighted survey measures set on a scale of 0 to 100, with 50 considered neutral and greater numbers signifying positive sentiment. All categories of the index either rose or were unchanged since last quarter, but are below what they were a year ago.

Other key findings of the survey:

Another upbeat signal on staffing. The projected headcount increase for the next 12 months rose to 1.1 percent from 0.5 percent last quarter. Business executives have some concern about the talent pool, however – “availability of skilled personnel” rose two spots to the No. 3 top challenge for businesses in the quarter.

Survey takers have a stronger view of their own companies’ prospects. In the first quarter, optimism about business executives’ own organizations fell below 50 percent for first time since the end of 2012. This quarter, that category rebounded smartly, increasing nine percentage points to 53 percent.

A more expansive view of expansion plans. Some 58 percent of business executives said they expect their companies to expand in the next 12 months, up six percentage points from last quarter.

Spending priorities. Technology continues to be the strongest category for anticipated spending growth, climbing 0.3 percentage points from last quarter to 2.6 percent. Other capital spending also rose to 2.1 percent from 1.5 percent, quarter over quarter

Deflation recedes as a concern. In a reversal from last quarter, inflation is once again a bigger concern than deflation. Some 23 percent of executives listed it as a potential issue, compared to 12 percent for deflation. Raw material costs, followed by labor costs, are the biggest component of anticipated inflationary pressures.

Hot Topics

Enrollments in undergraduate and graduate accounting programs have increased in the 2013-14 academic year, and have combined to cross the 250,000 threshold for the first time. On the recruiting side, accounting firms hired a record number of accounting graduates in 2014, representing a seven percent increase from the previous survey. The report found optimism from both universities and firms that the growth of the accounting profession will continue.

Statement on Standards for Accounting and Review Services (SSARS) No. 21 represents the efforts of the Accounting and Review Services Committee (ARSC) of the AICPA to clarify and revise the standards for members in public practice who perform reviews, compilations, and engagements to prepare financial statements. It is effective for engagements on financial statements for periods ending on or after December 15, 2015 but early implementation is permitted.

Troy K. Lewis, CPA, CGMA, chair of the AICPA Tax Executive Committee, testified before the House Small Business Committee on July 22 and offered specific changes that would ease small business tax burdens and stressed to committee members that timely communication with the IRS is imperative to small business taxpayers and their tax preparers.